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Signs of recovery for M&S fashion
Marks & Spencer's turnaround hopes were lifted today after sales figures showed the green shoots of recovery in its struggling fashion business.
The retail chain said clothing sales rose 0.6% on an underlying basis in the 13 weeks to March 29, driven by "clear signs of improvement" in womenswear following last autumn's relaunch of its M &S Collection.
Across general merchandise, which includes homewares as well as clothing, like-for-like sales were down by a smaller-than-expected 0.6% in the quarter, although this extends a three-year run of falling sales for the division.
Under chief executive Marc Bolland, who was appointed in 2010, t he company has hired new senior personnel and launched a celebrity-backed marketing push to revive its fashion business.
Marks said in a trading update: "Customers are responding well to our refocus on quality and style."
Today's figures should give Mr Bolland more time from investors to lead his turnaround, although an initial 3% rally for M&S shares was wiped out as attention turned to the squeeze on margins caused by discounting rivals.
Annual results are due to be published on May 20, with City forecasts recently pencilling in a 6% fall in profits to £623 million for the year to March.
It will mean the 130-year-old company being overtaken for the first time by rival Next - a relative upstart at 32 years old - which announced profits of £695 million last month .
Freddie George, a retail analyst at Cantor Fitzgerald, kept his sell rating on the stock today and warned the profits figure could go as low as £610 million.
He said: "We continue to believe it will take a number of seasons before the existing team is able to manifest a marked improvement in performance in womenswear."
Marks said its food department had a "great quarter", with the later timing of Easter failing to prevent an 18th quarter in a row of like-for-like growth.
Despite some improvement in consumer confidence, Marks said it remains cautious about the outlook.
It said: "Our focus is on continuing to transform Marks & Spencer into an international, multi-channel retailer."
Neil Saunders, managing director of retail consultancy Conlumino, said it was likely that M&S still lost market share despite the sales rise in clothing over the quarter.
He said: "By our calculations, M&S has underperformed the market during this period and, as such, has continued to cede share.
"In essence, this is now the challenge for M&S - to start to rebuild some of the market share it has lost over the past decade and more.
"In a market that remains crowded and competitive, and with a business model that still needs some refinement, this will be a tall order and one that can only be achieved by a more radical rethink of the proposition."